4000 - Advisory Opinions
Circumstances Under Which Notice to Depositors Must Be Sent to Trustee of Pension/Profit-Sharing Plan; Definition of "Self-Directed" Keogh Plan
August 17, 1993
Joseph A. DiNuzzo, Senior Attorney
This is in response to your letter of July 19, 1993, to Claude A. Rollin, Senior Counsel, FDIC Legal Division. The questions posed in your letter concern certain of the changes to the FDIC's insurance regulations that become effective December 19, 1993.
Your first question is whether an insured bank would be required to send the required notice of changes to the FDIC deposit insurance regulations to the trustee of a qualified pension or profit sharing plan that places deposits at a bank inasmuch as the bank offers a variety of retirement accounts and, thus, some of the beneficiaries of the pension or profit sharing plan also may have Individual Retirement Accounts or self-directed Keogh accounts at the same bank.
As you know, section 330.15 of the FDIC's regulations (12 C.F.R. 330.15) requires insured institutions to send by October 10, 1993, the notice (as prescribed in section 330.15) to each depositor or, alternatively, to all depositors having deposit accounts which could "potentially be affected" by the FDIC insurance rules that become effective December 19, 1993. The aggregation involving retirement accounts that becomes effective December 19, 1993, encompasses interests in IRAs, self-directed Keogh accounts, section 457 plan accounts and self-directed defined contribution plan accounts.
If the pension or profit sharing plan mentioned in your question is not "self-directed," then a depositor's interest in the deposits placed at a bank by the trustee or administrator of the plan would not be subject to the new retirement account aggregation rules. Thus, under those circumstances and in that particular context, the applicable beneficiaries of the plan would not "potentially be affected" by the change in FDIC rules effective December 19, 1993, and no notice would be required. The result would be different, of course, if the pension or profit sharing plan was self-directed.
The second part of your first question is whether the answer would be different if the trustee who "directed the funds to the bank" is also a plan participant. If the plan in question is not, on a whole, "self-directed," then we would not deem the trustee (acting in that capacity) to have self-directed his investment in the plan to the bank. Thus, the answer does not change simply because the trustee, who has investment discretion over plan assets, also is a participant in the plan.
Your second question concerns whether a Keogh Plan (with multiple employees) would be considered self-directed if an owner/employee of the plan deposits the plan assets at a particular bank. The FDIC staff view is that "self-directed" plans are those in which plan participants have the right to direct funds into a specific insured institution. If the Keogh plan in question does not authorize participants to direct funds into a particular bank, then the plan, as a whole, would not be deemed self-directed for purposes of deposit insurance coverage. This conclusion does not change if, in a multi-employee Keogh plan, the grantor/owner/employee of the plan places the plan assets in a deposit account at a particular bank. As you note, that person is deemed to be operating in a capacity (other than that of a participant in the plan) in investing the plan assets.
Please note that the opinions expressed in this letter are limited to the stated facts and assumptions. Different facts may yield different results.
I hope this is fully responsive to your inquiry. Feel free to call me at (202) 898-7349 with any other questions or comments.